• Thu
  • Oct 2, 2014
  • Updated: 6:41pm
My Take
PUBLISHED : Monday, 26 May, 2014, 3:43am
UPDATED : Monday, 26 May, 2014, 3:43am

Hong Kong economist offers sobering thoughts on corruption in China

Is corruption in China out of control? Many people would say yes. Some would say no. A few, including myself, would say I don't know.

Corruption in China has always been a prime news item but especially so now that the anti-corruption campaign by President Xi Jinping has gone into overdrive.

In his personal blog, University of Science and Technology economist Francis Lui Ting-ming recently offered a fascinating insight.

The professor begins with an observation often repeated on the mainland: The failure to crack down on corruption would lead to the nation's collapse; but to really crack down on corruption would lead to the Communist Party's collapse.

Lui thinks this is vastly exaggerated. After all, Lui implies that many Chinese only know about corruption in their own country and no others, so they have no point of comparison.

Meanwhile, many Western democrats think China is corrupt because it is not Western and is undemocratic. But this is inadequate because corruption exists in Western and/or democratic societies.

The question at the start of this column is the title of a 2012 study by George Mason University economist Carlos Ramirez, which Lui cites in his blog.

Ramirez compares corruption in China since 1996 with corruption in the US between 1870 and 1930. The reason is that he tries to compare like with like: Real income per capita in late 1990s China and the 1870s US stood at US$2,800 (in 2005 US dollars).

He then uses corruption indices to measure both countries, which indicate corruption in the US in the 1870s was seven to nine times higher than it was in China in 1996. By the time the US reached US$7,500 in 1928 - roughly equivalent to China's real income per capita in 2009 - corruption was similar in both countries.

Ramirez concludes that corruption in China is not high by the historical experience of the US. Both countries follow the "life-cycle" theory of corruption, "rising at the early stages of development, and declining as modernisation [gains pace]". Most economists agree that as China continues down the path of development, corruption will likely decline.


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This article is now closed to comments

You're bringing in an entirely irrelevant rant. We talk about corruption and you insist on talking the superiority of Western systems over China's. If I ask if you've eaten breakfast, are you going to make my day by telling me that you've beaten the cr-ap out of your wife? Sorry about this language if that's what it takes to get my message across.
Your observation is right on the money. The following is from part of my email transmission a few days ago.

"Can we define simple quid pro quo corruption? Not as easily as you think. Retired generals often get cushy consulting assignments and officer positions in defense industry. Corporate chieftains are given easy passes by major political parties when they decide to run for public office. Central bankers like Volcker, Greenspan and Bernanke are clean as a whistle 兩袖清風 during their government tenure but still manage to rake in a king’s ransom in deferred compensation:

I have utmost respect for Mr. Bernanke and think his 400K per diem consulting or honorarium well deserved. I don’t have wealth envy and the need for feel-good hate passions to vilify peoples and nations. It’s in this light that I disapprove the condemnation of China’s corruption after I have reframed this subject into a broader context."
Retired generals might also know a thing or two about what the military needs, and can help advise military contractors on product pipeline and product development based on their rather unique expertise. Do you have anything besides innuendo to suggest that such appointments are based on corrupt quid pro quo arrangements?
And as others have noted, what China really lacks is the rule of law to police such behaviour, and the lack of will for enforcing any flimsy rules that might be in place. I mean, living beyond your means is an obvious, easy, and basic red flag. Any cadre sending their children to US universities should have a lot of explaining to do...yet they don't.
You seem to be a big fan of the CCP system, their "consensus" culture, their "diversity of inputs", yada yada. Where in that "culture" is the track record for rooting out and punishing corruption (beyond the politically motivated fratricides of course)? If they have "consensus" on corruption, it seems much more tilted in the "let's all do it" direction.
BTW, Clinton makes a killing on the lecture circuit too. Does that make him "corrupt" also? Is he getting "deferred compensation" for his presidential decisions? Bernanke is paid handsomely to share his wisdom, by many different suitors. Are we to conclude that, whenever someone pays him to speak, he must have done something with fiscal policy while at the Fed that directly benefited the company sponsoring him? Do you have anything besides innuendo?
Not every former government official is corrupt in the US, just as I'm sure that there are many non-corrupted public officials in China. However, please note the following with regard to the passage of Medicare part D law in 2006:
Former Congressman Billy Tauzin, R-La., who steered the bill through the House, retired soon after and took a $2 million a year job as president of Pharmaceutical Research and Manufacturers of America (PhRMA), the main industry lobbying group. Medicare boss Thomas Scully, who threatened to fire Medicare Chief Actuary Richard Foster if he reported how much the bill would actually cost, was negotiating for a new job as a pharmaceutical lobbyist as the bill was working through Congress.[28][29] A total of 14 congressional aides quit their jobs to work for the drug and medical lobbies immediately after the bill's passage.
This goes on everyday and is perfectly legal. I don't defend corruption on any level, however, the moral high ground has been ceded long ago mate.
I'm certainly not suggesting every CCP official is corrupt either, nor would I say there is no corruption in the US. It comes down to disclosure, transparency, rules, enforcement, consequences, and deterrence. And I would suggest that the prevalence of corruption is much higher in China, and the mechanisms for reducing it are, shall we say, much less developed.
Your example of Tauzin, and possibly of Scully, are excellent examples since they seemed to get paid, disproportionate to their new responsibilities. As for the aides, it depends if they were disproportionately remunerated in their new jobs to justify a suggestion of "deferred quid pro quo". And that is legal, and is very much nauseating. But the fact that such an example exists does not and should not excuse the CCP corruption that happens yesterday, today, and most assuredly tomorrow.
By their own admission, corruption is a serious problem in the CCP. However, I think that maybe some of us westerners might want to take a look in the mirror, especially Americans. The only difference between corruption in China and the USA is that it is legal in the USA. The instance of government officials who retire from government in the USA and then go to work for companies or entities that they used to regulate or have previously received campaign contributions from is a daily occurrence. Political campaigns and parties can now be legally bought by the highest bidder. Can anyone really, with a straight face, say that the USA is any less corrupt than China today? It takes a different form, but the result is the same.
Retired "government officials" who move into the private sector is NOT corruption. If they continue to receive government pensions while doing so, you could maybe make some argument about double-dipping, I suppose. But those government officials aren't misusing and abusing their government position, since they're no longer in it. By contrast, corrupt CCP officials are abusing their CURRENT positions for personal gain. There is a huge enormous difference. If Wen's family do well financially in the next 10 years, that wouldn't raise too many eyebrows. It's that they did ridiculously well during the time he was China's #2 man that rouses curiosity, shall we say.
Suggesting that political campaign contributions amount to "corruption" expands the concept to the point of absurdity. When the concept is taken to silly extremes, then perhaps one can suggest that corruption in China is comparable to that in the US.
Ant Lee
alex lo, if you dont know you should not be writing this twisted and misleading article. anyone who have worked or done business in the mainland would know they are corrupted to the teeth at all levels. how do you think the leaders get to sent their children to the US and Switzerland on "communist salary"? and their sons and daughters buying listed shell companies in HK? Use your brain for once.
Corruption in the US changed because the system and laws changed. And I am not sure how he got an accurate figure for US corruption in 1870, when a large part of the US was not anything but a lawless frontier territory.
But it is not just the amount of corruption, it is the size of it. China is the only country in history (with the possible exception of some Roman emperors) to amass the amount of money just from corruption - in some cases 10's of billions of $US that some party officials have gotten.
Well put. Any "corruption index" that tries to demonstrate some "average" of the level of corruption misrepresents the data when dealing with a non-standard distribution...and there's no reason to think that corruption occurs on a Bell Curve.
Forget about the fact that comparing 2009 China to the US of nearly a century ago is not that meaningful. But when you see Wen's family having enriched themselves at the trough during his decade in prominence, and with so many cadres sending their kids overseas to Ivy League schools when the average Zhao can barely afford a micro-flat, trying to suggest that corruption in China isn't all that remarkable doesn't really pass the smell test.




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